Written By: Gail Foster
We all know that a real estate contract of sale is an agreement between a buyer and a seller regarding the purchase of a property, as well as the terms and conditions each participant is required to execute within certain time frames to be “in contract”. If either of the participants neglects to meet these deadlines or satisfy certain contingencies then they are in default of the contract. The two main contingencies have been the home inspection and the financing contingency. These contingencies protect the buyer from losing their deposit, if they find the home they are buying is not in the condition they expected or they have a problem with their financing and are unable to complete the transaction at settlement.
The home inspection contingency is in effect until both parties agree that the condition of the property is satisfactory or the seller has agreed to make certain repairs to bring the properties condition to a satisfactory level for the buyer. The financing contingency is generally in effect until settlement, the property must appraise for its negotiated price, the buyer must meet all the lending guidelines for the loan they’ve applied for and title must be clear and marketable for the property to transfer. Until we get that “clear to close”, no one breathes a sigh of relief.
In October of 2009, the Maryland Association of Realtors added the Unilateral Notice of Termination under Contract of Sale document. This document allows either the buyer or the seller to withdraw from the contract if one of the parties is in default of a term, contingency or condition. To protect our buyer’s ability to close the deal, we need the lender’s help with the required documentation to provide to sellers to keep the transaction moving forward.
Page 2 of the Maryland Association of Realtors Contract requires a timeframe to be set for the buyer to make “written application for financing.” It is usually 5-7 days after the contract offer has been accepted. It is important for me to know as the Buyer’s agent, what is the timeframe for that to occur so that I can fill in the required amount of days on the contract offer so the buyer will be in compliance. Additionally, I will need a written statement from the lender documenting that the contingency has been met.
The pre-approval letter does not meet this requirement. My interpretation, which is not a legal opinion, is that once disclosures have been signed by the buyer, written application has been made. This accomplishes a number of things for buyer and seller. It ensures that the process has started and hopefully will move forward in a timely fashion and it illustrates an additional level of commitment on the buyer’s part to finish the transaction. If this cannot be accomplished within the contractually agreed upon timeframe, the buyer is in default and the seller can unilaterally withdraw.
Page 2 of the MAR contract also states a timeframe for the “written financing commitment” to be obtained from the lender on the buyer’s behalf. The contract clearly states if the commitment is not obtained in the required timeframe, the seller may declare the contract to be null and void. It is important for the Buyer’s Agent to understand what the timeframe is for the lender to be able to provide the required documentation. And a small reminder to any Realtor who may be reading this, when extending a contract settlement date make sure to extend the timeframe for the financing commitment also. It is our job to protect the interests and deposits of our clients.
Realtors and Lenders must work together to make sure all contractual conditions, terms and contingencies are met by our clients. We are on the same team, working together for the benefit of our buyers. Building a business means building a team that makes things happen!
About The Author
Gail Foster - As an active real estate industry professional for the past twelve years, Gail Foster is a proud licensed mortgage officer and a Realtor in the state of Maryland. If you would like to become a writer for NAMU®, please email us at: firstname.lastname@example.org.